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Close to one year ago, 12-month inflation numbers began a steep climb into historic territory, reaching levels not seen in 40 years. At the time, analysts optimistically projected that inflation would be transitory– a temporary result of the pandemic and its resulting economic challenges. However, it quickly became apparent that inflationary measures would remain high for at least a year, if not more, and that commercial property would be impacted by the continuing trend of substantial increases in the costs of goods and services. In December of last year, we looked ahead to 2022 by discussing the potential impact of inflation on commercial real estate, focusing on owners and investors. We followed up in January by outlining the potential impacts of inflation on employers. At that time, analysts were still optimistic that supply chain issues, labor shortages, and high fuel costs would begin to slow by mid-year. However, we’re still continuing to see prices climb, making the cost of living and the cost of doing business higher than many can remember. The 12-month inflation rate reached 9.1% in June of this year. By comparison, the traditional notion of a normal acceptable rate of inflation is a 2% annual increase. Although banking systems worldwide continue to take measures, including raising interest rates, to manage inflation growth, it’s clear that these economic conditions will be with us for some time. For commercial renters, this ongoing inflation may cause significant ramifications. Inflation and Commercial Lease Escalations You can’t turn on the news right now without seeing stories about residential renters who have been priced out of their current homes. With residential leases typically spanning just 12 months, landlords have annual opportunities to raise rents on their tenants. Commercial leases, on the other hand, average five to seven years in length. Because of this, cost escalation for commercial occupiers typically develops slowly and predictably.  Commercial leases typically have built-in rate increases. In some instances, these escalations are tied to the inflation index: As the cost of goods and services increases, so too does the cost of renting that commercial space. However, Cushman & Wakefield economists Rebecca Rodkey and James Bohnaker say that these inflation-based escalations may be the exception and not the rule today: “After decades of inflation stability, many leases have an escalator—a fixed number—based on a historical average of inflation,” they explain. Today, commercial occupiers with fixed escalation rates are benefiting from the current economic environment, as their built-in annual increases are likely much lower than the rate of inflation. That’s great news for occupiers who are in the early or middle years of their leases. However, lessees whose agreements are coming to an end in the immediate future may have significant challenges keeping their real estate expenses within their current price range. Given the unpredictability of our current economic environment, property owners will be more likely to negotiate leases with inflation-based escalations than they have been in the recent past. Inflation and Buildout Costs Tenants leasing new spaces and requiring a buildout should anticipate substantially higher costs in our current economic environment. Prices for construction materials are significantly higher than before the pandemic– in some instances more than double. Compared to February 2020, PVC and plastic piping expenses have increased nearly 130%, aluminum has jumped more than 102%, iron and steel prices have increased nearly 89%, and lumber has jumped almost 50%. In some markets, lessees may be able to negotiate tenant improvement allowances or even buildout rent exceptions– but typically these are concessions made in soft markets with high vacancy rates. Here in Southwest Florida, our record low vacancy rates have created a distinct advantage for commercial owners. Our local MarketBeats reports show Southwest Florida industrial vacancy at a microscopic 1%, office vacancies at 4.7%, and retail vacancies at 3.8%, all significantly lower than the national vacancy rates of 3.3%, 17.5% and 6.3%, respectively. While some lessees may consider delaying their buildouts until conditions stabilize, they may be in for a wait. Cushman & Wakefield’s Office Fit-Out Cost Guide notes that 96% of commercial contractors expect supplier costs to increase over the next six months, with the most consequential cost increases anticipated in fixtures, equipment, and furniture. Inflation and Base Rent When it comes to base rents, the impact of inflation may be overrated. According to Rodkey and Bohnaker, evidence suggests that market conditions drive rent patterns more significantly than broader inflation. This is good news for tenants in much of the country where vacancy rates remain high. However, Southwest Florida’s remarkably low vacancy rates again are creating a beneficial market for owners rather than for occupiers. Evidence of this can be seen in our average commercial office rent rates. In Q2 2022, office property was leasing at more than $20/square foot, an increase of 25% in the last two years. However, retail and industrial rents have been growing at a much slower pace over the last eight quarters. Because these two sectors have been hit harder by labor shortages and the increased cost of goods, the market simply may not be able to bear higher rent costs for retail and industrial occupiers. Navigating Complex Relationships Our current economic environment is complicated, and unlike in days past, our current inflation issues can’t be pinpointed to a single source. The pandemic, U.S. economic recovery, worldwide supply disruptions, labor force changes, energy prices, and even the war in Ukraine each play a role. As a result, it’s difficult to predict exactly when this uncertain period is likely to end. Similarly, when it comes to commercial property, inflation is part of a complex economic equation that also involves lease terms, rent prices, vacancy rates, and buildout costs. Our current economic conditions can create both opportunities and challenges for both owners and occupiers. One thing is certain: In our unpredictable economic environment, planning further in advance is more important than ever.   The Commercial Property Experts at Cushman & Wakefield | Commercial Property Southwest Florida have the local knowledge, data, and experience to help

By Gary Tasman When the U.S. Census Bureau released its new population estimates for cities and towns this May, the numbers weren’t surprising to Southwest Floridians. Lee County was one of the top-ten fastest growing counties in the nation, with an estimated net increase of more than 23,000 new residents in 2021. More than 8,200 of those new residents moved to Cape Coral and nearly 5,900 more migrated to Fort Myers, placing both near the top of the list of the nation’s fastest-growing cities. With that population explosion comes the need for more services to meet the growing needs of our new residents, in particular medical services. Keeping up with our historically fast-growing community’s needs has always been a priority—and a challenge—for Lee Health. Keeping Medical Services Accessible With our most recent population surge, ensuring that medical services are accessible to the community is more important than ever. Recognizing this, Lee Health has $800 million of new capital projects in the works to expand access to hospitals, physicians and specialist services. Other medical providers have taken note of our growth and are also making moves into this market. In the last five years, Lee Health has built a standalone facility for Golisano Children’s Hospital and also expanded Gulf Coast Medical Center by three stories, adding 216 patient rooms, and they’re building a new tower to house intensive care units, dialysis suites and more. Those projects, totaling more than $480 million, have allowed the hospital system to keep pace with our region’s growth, but more is still needed. In 2020 (the most recent year that the Florida Department of Health has published data), Lee County had 281 hospital beds for each 10,000 county residents, placing the county in the top third for access in the state. That number is comparable to Palm Beach County and stronger than other West coast counties such as Collier, Pasco and Manatee. The fact that hospital bed availability has remained competitive is impressive, considering that Lee County’s population growth has risen significantly faster than any of those counties over the past 20 years. Upcoming Lee Health Projects Over the next half-decade, Lee Health’s aggressive plans to keep healthcare accessible include the Lee Health Colonial Campus on Challenger Boulevard between Colonial and Winkler. The $465 million hospital would include 168 acute care beds, 30 emergency rooms, 16 operating rooms and a medical office building. And with 52 total acres available to develop, the site promises plenty of room for growth in the future. The hospital system has acquired an additional 57 acres on Pine Island Road in Cape Coral, one of Southwest Florida’s fastest-growing corridors. “Cape Coral has a population of 200,000 and growing,” said Chief Financial and Business Services Officer at Lee Health System,  Ben Spence. “Where it’s moving is Northwest, outwards from Pine Island and North. The beauty of Pine Island Road right now is that there are so many developments going in, there’s going to be incredible synergies.” Although Lee Health is still determining the best use for the upcoming Cape Coral facility, Spence tells us it will likely focus more on ambulatory care. Options include a free standing emergency room and surgery center as well as specialty services focused around high-need areas such as cardiology, orthopedics or oncology. Health Care Competitors Turn to Lee County Lee Health is not the only hospital system with its sights set on expansion in Lee County. In 2019, Florida removed major portions of the state’s Certificate of Need requirement, opening the state to more competition in health care services like hospitals, and rehabilitation centers. The largest competitor to take advantage of this more competitive environment is HCA Healthcare, which targeted Cape Coral for a new freestanding emergency center on Pine Island Road. Within the next few years, HCA plans to build a hospital with 100-plus beds just a stone’s throw away from Lee Health’s new site on Challenger Boulevard. HCA, a for-profit health system, is the largest in the state of Florida. ShorePoint Health (formerly Bayfront Health) has also ventured into the Cape Coral market, opening a full-service emergency room and urgent care center in Northeast Cape. Competition leads to Innovation As these new competitors enter the market, Lee Health has made strategic moves to both prepare for and engage with potential competition. An example of this can be found with Lee Health’s strategic alliance with the Cleveland Clinic, with whom the system has established a clinical affiliation on its cardiovascular program. “We have opportunities to improve and learn from other systems that are at the top of their class,” Spence said. “Cleveland Clinic is number one in the whole nation on cardiovascular. We want to align with those types of partners.” Another partner new to Lee Health is Alabama-based Encompass Health. The two jointly own and operate the Encompass Health Rehabilitation Hospital of Cape Coral and plan to partner on a similar project adjacent to Gulf Coast Medical Center. Southwest Florida’s needs for health care are constantly evolving as our population grows and our community’s demographics shift. “We know that you need access to health care. It needs to be timely, it needs to be a great experience, the outcomes have to be of the best,” Spence said. “We know there’ll be new entrants and we want to be that provider of choice.” What does this Mean for Commercial Land Owners? With the need for more medical facilities higher than ever, investors with property zoned for commercial professional use are in an ideal position to develop or sell. Our first quarter medical office MarketBeats report notes that economic conditions, combined with six quarters of positive net absorption, have translated into record-breaking vacancies in our medical office market. To hear more from Ben Spence about Lee Health’s growth plans for Southwest Florida, tune in to episode seven of our podcast, What’s Developing in Southwest Florida. Are you ready to take advantage of this unprecedented surge in need for medical office property? Contact the Commercial Property Experts

By Gary Tasman Just six months into the year, 2022 has proven to be a challenging year economically. High inflation, a volatile stock market, a tight labor market and growing interest rates have all created havoc for investors. Commercial real estate, long considered a safe haven in inflationary times, has remained popular among investors– and with proper care and attention can still provide considerable yields for property owners. When commercial property sales topped $600 billion in the U.S. in 2019, it marked the busiest year ever in the sector. And while COVID-19 cooled the commercial real estate market the following year, the downward trend didn’t last long. In 2021, sales topped $809 billion, according to data from Real Capital Analytics– a whopping 35% over the previous high. Although we expect the market to normalize in coming months, we can still anticipate another strong year in 2022. Data from Cushman & Wakefield explains one reason why real estate has long been considered a hedge against inflation. For each 1% increase in inflation, total returns on property average 1.1%. “In other words,” explains David Bitner, Global Head of Capital Markets Insights, “commercial real estate not only protects against higher inflation but provides outsize returns specifically in these environments.” With all investment comes risk, and commercial property is no exception despite its traditional returns. As with most investments, one way to mitigate potential jeopardy is to closely monitor current business trends and economic conditions and properly manage that asset in response. For many commercial property owners, that task can be overwhelming. Just day-to-day property management tasks can quickly become a full-time job, leaving little time for the added responsibility of managing that same property as an investment asset. But these property owners have a secret weapon at their disposal: professional property managers. What do Property Managers Do? Most people’s perceptions of property managers come from personal experience as tenants, either in a residential or commercial setting. As a renter, your property manager is the person you pay once a month and on whom you depend when you need repairs. While accounts receivable and plumbing maintenance are important responsibilities, commercial property managers present many more benefits to busy owners and investors, especially in economic times like these. Manage Multiple Properties The recent property boom has allowed many investors to broadly expand their commercial real estate holdings. While economies of scale allow owners to take on more properties without a proportionate increase in some expenses, other factors can manipulate this equation. When an investor holds multiple properties, they are often widely dispersed geographically, making it difficult to respond to on-site issues in a timely manner. No matter the nature of these issues, a professional property management company has resources dedicated to efficiently deploy staff to manage those affairs. CAM Calculations Economic conditions like supply chain issues, labor shortages, and high inflation have raised expenses for property owners, and despite attempts by the Federal Reserve to quell the cost of living, inflation is still surging. In the Southern U.S., the 12-month consumer price index advanced 9.2% in May, the highest level our region has seen yet. For property owners, these rising costs can produce challenges to area maintenance (CAM) budgets. Typically, CAM fees are calculated at the start of the fiscal year and reconciled at the end of the year. If CAM fees are initially set too low, unforeseen expenses and rising costs can leave owners in the red for months until reconciliation, and tenants who are hit with high increases may be driven to vacate. A professional property manager has the knowledge and expertise to better anticipate expenses for the year and set appropriate CAM fees. Lease Negotiations and Terms During the height of the pandemic, commercial tenants were reluctant to sign long term leases, but that trend appears to be changing. Nationwide in Q4 2021, nearly one-third of all commercial leases were for a term of 10 years or longer. That same quarter, the average commercial lease was 57.8 months, compared to a low of 51.2 months in Q3 2020. Longer leases can be beneficial for property owners because of a reduced risk of vacancy, but can also be risky given the volatility of the current economy. A property management company has expertise in designing and negotiating leases to mitigate risk for owners, for example by preparing a document that includes automatic increases triggered by the cost of living index or other economic variables. Ensuring Full Units Our region is experiencing historically low vacancy rates in commercial property. Our Q1 2022 MarketBeats reports show a vacancy rate of 4.4% in the general office market and a stunningly low 1.7% in industrial properties. As the market normalizes, vacancies will eventually increase. Some level of tenant turnover is natural and expected, but lengthy vacancies can quickly become a financial drain on commercial investors, especially those not equipped to market their assets to new tenants. Property managers can keep your portfolio of properties full by marketing your assets, vetting applicants, and onboarding new lessors efficiently. Maintenance and Beyond The more properties you own, the more difficult it becomes to handle the maintenance and repair needs of those assets. The current labor shortage has made it difficult to find contractors, maintenance workers, and other vendors, and new or part-time property owners may not have the resources needed to find and enlist these tradespersons on short notice. A property management agency will already have established relationships with these vendors and some, like Cushman & Wakefield | Commercial Property Southwest Florida, employ their own facilities services team to efficiently handle issues. As the commercial real estate market normalizes and vacancies increase, it will become more difficult for property investors to keep their units full. To mitigate this trend, it is imperative for owners to have a well-maintained, financially stable asset. Professional property managers are better positioned than owners to ensure an asset is in good condition, both physically and fiscally. If you’re new to property ownership– or if you

By Gary Tasman According to the National Oceanic and Atmospheric Administration (NOAA), we see 15 named storms, seven hurricanes and three major hurricanes in an average hurricane season from June 1 to November 30.  Regardless of the size and intensity of the storm, our team wants you to be fully prepared for small tropical storms and major hurricanes alike. Here are our 15 tips to ensure your commercial property has the best chance of mitigating the damage and safety hazards that can occur during and after major storms. Before a Hurricane Make sure your building was built to code and make any necessary updates as soon as possible. Many commercial and industrial buildings along the Gulf Coast were built to withhold hurricane-force winds. Read your lease and make sure you know exactly what you’re responsible for. If you have any questions, please visit cpswfl.com. Know about hurricane hazards and assessing risks. Check out this FEMA guide for more information. Make sure your flood and insurance policies are in place. If your property is in the hurricane’s path, it’s too late to get insurance coverage. It’s a good idea to take photos and videos of your building before the hurricane hits. This could come in handy later for insurance purposes. If your business is on the ground floor, make sure you place loose items up high or remove them from the building altogether in case of a flood. Remove furniture and items from outside common areas, decks and patios. Update emergency contact information and pay close attention to evacuation orders. Backup all computer files in the cloud and move computers to a secure, centrally located room. If they can’t be removed, place a garbage bag on top of them and secure it with duct tape. Place any paper files in this room as well. Since the window sills are usually lower, it’s best to place a towel along your store front to prevent wind-driven rain from entering your unit. Property owners should create or update their tenant phone number list as well as their tenant communication plan for emergencies. If you’re in a property with a generator, make sure the fuel is topped off, any automated circuits are tested in advance and that you have access to fuel on the backside of the storm. After a Hurricane If you notice that your building is flooded or damaged, it’s important that you DO NOT enter the building. There could be hot electrical lines, downed power lines that could be energized, unknown structural problems or the roof or the walls could cave-in. If you need assistance or have any questions, please don’t hesitate to contact us. Be aware that it could take some time to repair your building. Contractors will have a lot of work and may not be able to respond quickly. Acquiring materials for repairs will also be hard, if not impossible, to find. Check in with your tenants to assess any further issues or damage. Are You Sure You’re Insured? Making sure you have your insurance policy in order before a storm hits can make all the difference. Locate your insurance documents and keep them in a safe place. If anything needs to be updated, it’s best not to wait. What’s covered under your flood insurance policy can be complex so making sure you know exactly what’s covered is extremely important, especially because cancellations are becoming more common. This can vary depending on the insurance policies and providers chosen, where your business is located, the industry or type of business. Cushman & Wakefield | Commercial Property SWFL knows that hurricanes can be unpredictable. That’s why we have a dedicated property management division that will help you review your policies, and help set a detailed storm management plan in place to secure and repair your building. Our team will also assess the units and building to ensure they are safe to enter. Hurricane season is here. Make sure your building and tenants are prepared. For a free assessment of your property, reach out to the Commercial Property Experts at Cushman & Wakefield | Commercial Property Southwest Florida at 239-489-3600 or contact-us.

By Gary Tasman As we look back at downtown Fort Myers 40 years ago, there was little to no reason to head that way unless you had business to conduct during the day. Downtown turned into a ghost town after 5 p.m. on weeknights and on the weekends. But lawmakers and community leaders saw its potential and had a vision for change. Flash forward to today, and you’ll witness the renaissance taking place that is transforming downtown Fort Myers into a desirable destination to live, work and play seven days a week. In 2020, we identified key developments that would have the greatest impact on the growth of Downtown and Midtown Fort Myersincluding the Luminary Hotel and the return of conventions with the Caloosa Sound Convention Center. Now business and housing markets in the area are booming and there are a variety of new downtown Fort Myers businesses in the permitting process. Few cities in the region have it all in one place like Fort Myers does. Nestled alongside the picturesque Caloosahatchee River, downtown boasts boating, parks, walkable streets, rich history at your fingertips, local charm, independently owned boutique shops and restaurants, outdoor dining, and an array of arts and cultural events. City of Fort Myers Mayor Kevin Anderson said, “Over the last 20 years, the city has done a phenomenal job of bringing in more rooftops, and the focus is now on continued economic development.” Poised for More Growth Fort Myers and Lee County are poised for more growth than ever as people from across the country flock to our beautiful waterfront paradise. With the new Caloosa Sound Convention Center in full swing, we are seeing more national and international conventions coming back to Fort Myers and away from Bonita Springs, Sanibel and Captiva. Plus waterfront living, vibrant nightlife spots and a variety of entertainment options only add to the area’s intrigue. The Luminary Hotel has been hugely successful. The 243-room hotel features a rooftop bar, signature restaurant, modern diner, local coffee roastery and nearby waterside restaurant. Guests can spend time in the hotel or walk outside into the center of downtown Fort Myers to charming shops, restaurants and bars. The Luminary’s potential to bring more businesses to the Fort Myers River District paired with other downtown developments will make the area one to watch. The Caloosa Sound Amphitheater is now open and 2,500 people are able to watch concerts and other performances. Centennial Park will also soon be complete and that will help attract even more people to the area. Big-name shows at these venues will only equal more dollars being pumped into the downtown economy. Together these venues will help put downtown Fort Myers on the entertainment map at the perfect time, as more performers are beginning to tour the country. Planting the Seeds of the Future With these demand generators in place, 40 years from now the city could be unrecognizable. These developments will not only enhance the city and make it more appealing for property investors, but we will also see more businesses consider Fort Myers as their base of operations. If we continue on this path of growth, the area could become another unique world-class 18-hour-a-day live work and play environment alive with deep local culture and rich subtropical entertainment and atmosphere. “We’ve got to do it right, so it is attractive to businesses and people say that’s a community we want to do business in, we want to raise our families in and that’s a community we want to live and work in,” Mayor Anderson said. During the height of COVID, 850 to 1,100 people were moving to Florida each day. 23,000 people moved to Lee County alone from July 2020 to July 2021. Downtown Fort Myers and Lee County are blossoming and the seeds we plant now will help the area become the booming metropolis we know it can be. The Future of Downtown Fort Myers Focusing on the future and potential of downtown Fort Myers should be our priority. Ensuring that Fort Myers remains the vibrant, attractive city it is now depends on whether city leadership and developers do the right thing today. The city is looking at the possibility of taking Henry Street from the river down to the stadium and making it a pedestrian walk. There is also talk of smart parking and the technology that comes with self-driving cars. We will likely see the day when there will be more people than cars coming downtown. This means the city and businesses should look at how to better serve heavy pedestrian traffic and even consider the future of parking garages in the downtown space. Some big developments to keep in mind: Vantage – Proposed 16-story apartment building (225 units) and an accompanying 4-level parking deck. Seaboard Waterside Apartments – Two 6-story apartment buildings with a total of 420 units and amenities. Edsel Lofts – Residential development consisting of nine 3-story townhomes, each with a two-car garage and master suite terrace. AC Marriott – New 8-story, 132-room AC Marriott hotel with a ground floor bar and rooftop entertainment center. Gardners Park Grove – New residential development consisting of 10, two-story homes. Riverfront First Street Apartments – New 8-story multi-family development consisting of 221 residential units featuring a pool, riverwalk and associated amenities. McCollum Hall – Complete renovation of the historic McCollum Hall Building. Allure – Two new 32-story towers with 292 residential units and amenities. Staybridge Suites Hotel – New 6-story hotel with 100 guest rooms, pool, fitness area, and associated amenities. Prima Luce – Two 22-story towers with 220 residential units and amenities. Seaboard Self Storage – Self-storage facility consisting of three buildings with a combination of 60,000 sq ft. 2233 Grand Avenue Warehouse – New 3,892 square foot retail warehouse. First Street Apartments – Multifamily development consisting of 275 units, parking garage, 9,189 sq ft clubhouse, pool and related infrastructure. Hampton Inn – New 111-room Hampton Inn hotel on the corner of McGregor Bvd and Cleveland Ave.

By Gary Tasman A decade ago, it was hard to imagine the concept of a smart building or how it would transform the commercial real estate landscape. Today, smart building technology and flexible workspaces are one of the top priorities for commercial spaces. Some advantages of using a smart building for your commercial property include: Reduced costs related to maintenance and energy consumption Increased productivity Reduced amount of emissions Increased resale value What is a Smart Building? A smart building is any building that uses the Internet of Things (IoT) to automatically control things like heating, power, ventilation, air conditioning, security, lighting and other systems. This means the building can be managed from anywhere and at any time. Smart buildings give us more data than ever before, which allows decisions to be made with more clarity, better allocation of resources and increased savings in the long run. In time, all commercial buildings may become smart buildings. What is the Internet of Things? Smart technology is possible in part because of the IoT or everything connected to the internet. Think of objects and devices that “talk” to each other such as smartphones, computers, and watches. By combining these connected devices with automated systems, the building can gather information, analyze it and use it to make informed decisions from saving on energy costs to completing tasks for staff. An Office vs a Smart Building Smart buildings can give you an experience that general commercial buildings cannot.  The everyday building can’t collect data from user devices, systems, services and sensors the way a smart building can. This data not only makes the building programmable and customizable, but also more responsive to the needs of the building manager and employees. This technology is transforming how Facilities Managers approach asset management. With this data at their fingertips, they can ensure the comfort of its occupants, increase utilization and interact with staff at a higher level. Imagine an office building coming to life when you walk in! As developers nationwide face supply chain disruptions, rising interest rates and increased inflation, developers in the Southwest Florida market show little cause for concern. Population growth continues to climb and more companies are moving to the area, which also helps drive revenue. This gives developers a fantastic opportunity to capitalize on the smart building trend and create value with their property. Why Companies Should Invest in Smart Buildings One of the most enticing things about smart buildings is that when you compare them to conventional buildings, they perform much better. Although they cost more upfront, they bring in more rent in the long run. Smart building technology can cover more than heating and air conditioning and lighting systems. What makes this technology so appealing is that it can integrate into just about every system. For example, in retail, smart building technology can apply to things like security cameras and point-of-sale (POS) systems. Some local smart building examples include: Arthrex NeoGeonomics Franz EyeCare “It’s exciting to see businesses in our community shift into smart buildings and experience all of the benefits,” said CEO and Principal Broker, Gary Tasman. “As more businesses adopt this trend and more companies relocate to Southwest Florida, we could quickly see the commercial property landscape in our region shift toward this incredibly beneficial technology.” How Smart Buildings Make the Office More Efficient  It’s no secret that the office is forever changed in a post-pandemic world. When more people and businesses wish to move to a city like Fort Myers, city planners and commercial real estate developers must consider making the office environment more appealing than working from home. They have to figure out what the office environment now means for their company and what kind of employees they wish to attract. An economy that’s poised to keep on improving paired with strong office-using employment growth is making more companies seek out new types of office space. In fact, global Experience per Square Foot™ (XSF) data shows that employees with choice and control over where they work perform better. Employees are looking for companies that make the job and office an experience, not just a cubicle to go to every day. If you haven’t thought about moving back to the office or a hybrid work environment, it’s only a matter of time. For more information about smart building technology and commercial development opportunities around Southwest Florida, reach out to the Commercial Property Experts at Cushman & Wakefield | Commercial Property Southwest Florida at 239-489-3600 or by contact-us.

By Gary Tasman The transportation corridors around Southwest Florida International Airport (RSW) have been home to some of the fastest-growing development projects in our region during the past 10 years. While we’ve previously discussed some of the exciting commercial improvements near the airport, we haven’t focused on the airport itself, and how it both impacts and reflects our area’s fast-growing economy. Continued Growth at RSW For the third straight month, RSW has posted passenger numbers above 1 million, a trend unseen since before the pandemic in late-2019 and early-2021. While most airports around the nation are still struggling to return to their pre-COVID numbers, RSW’s passenger traffic continues to steadily climb. Ben Siegel, executive director of the Lee County Port Authority, estimates that only about 10 to 15 percent of our nation’s airports have truly recovered from the pandemic and RSW is the clear leader in post-COVID passengers. “In 2021, we had the busiest year in the history of the airport with 10.3 million passengers,” explained Siegel on our April “What’s Developing in Southwest Florida?”[LINK] podcast. In terms of the number of travelers at RSW since the start of the pandemic, Siegel adds, “We went from being 95 percent down to the fastest recovering airport in the country. We are now fully recovered and, currently, 2022 is exceeding 2021.” Economic Growth and Passenger Traffic Airports are instruments of economic growth and the recovery of passenger traffic at RSW is synergistic with the evolution and recovery of our region. Our local economy would not be developing at its current rapid pace if not for the ease of travel to Southwest Florida. As more people have visited Lee and Collier counties and discovered our outstanding beaches, recreation, education and overall quality of life, more business owners and remote employees have made the decision to move here permanently. Those new residents, in turn, produce additional demand for the airport. The synergy between airport and economic growth is quantifiable. Economist Jan K. Brueckner found that a 10 percent increase in airport passenger traffic leads to a 1 percent increase in service industry employment in that metropolitan area. But airplanes are more than just passenger vehicles — they also move cargo from point to point and RSW is seeing expansion in this arena as well. In 2019, the airport handled nearly 35.7 million pounds of freight, a number that climbed 16.5 percent to more than 41.5 million pounds by the end of 2021. Building for the Future To accommodate the anticipated continued growth of both passenger and freight traffic, the Port Authority has adopted an aggressive and robust capital improvement program that will see a billion dollars in airport investment over the next decade. The plans begin with a three-year Terminal Expansion Project that has already started. This expansion will simplify the TSA screening process, and both increase and improve the amenities offered to passengers. Other long-term capital projects on the horizon include adding a new concourse with 14 additional gates, an expansion of parking and rental car services, as well as the construction of a parallel runway. A new $80 million Airport Traffic Control Tower was completed in December, with the cost split between the Lee County Port Authority and the Florida Department of Transportation. Building a tower without funds from the FAA is unusual, if not entirely unheard of, but the Port Authority recognized the need to construct a new tower as the lynchpin for its future second runway. To diversify its revenue stream and generate capital for future projects, the Port Authority is continuing to develop Skyplex, a commercial development area on the north side of the airport, which offers a destination experience with Class A office space, hospitality and entertainment, transportation logistics and support and more. At Cushman & Wakefield |Commercial Property Southwest Florida, we are excited to partner with the Lee County Port Authority on the master planning and ultimate development of Skyplex. With more than 1,000 acres of land that can be developed for both aviation and non- aviation, Skyplex has the potential to become a truly special destination for residents, travelers and Southwest Florida businesses. Skyplex offers an outstanding opportunity for commercial developers along a highly visible transportation corridor. The property is strategically located in a Foreign Trade Zone and has 1,150 acres zoned for aviation, as well as multi-use commercial and light industrial development. This property will only become more desirable for investors, developers and business owners as RSW continues to grow. For more information about commercial development opportunities around Southwest Florida International Airport, reach out to the Commercial Property Experts at Cushman & Wakefield |Commercial Property Southwest Florida at 239-489-3600 or by contact-us.

By Gary Tasman Utter the words “industrial property” to someone outside the world of commercial real estate, and they’re likely to picture concrete jungles with enormous drab buildings, smokestacks and air pollution. In some parts of the country, that might be an accurate impression. However, when we talk about industrial property here in Southwest Florida, smart developers and investors realize that a very different picture is emerging. Industrial real estate is a broad term that covers commercial uses like manufacturing and production, research and development, and storage and distribution. Industrial real estate demand is on the rise, driven by consumption, trade, transport, and e-commerce.  Cushman & Wakefield’s U.S. Industrial MarketBeats Report for Q1 2022 shows exactly how popular these properties are. For the sixth straight quarter, demand for industrial property is outpacing supply, driving the vacancy rate to an unprecedented 3.3% across the country. Here in Southwest Florida, the industrial vacancy rate is a stunning 1.7%. Although there are nearly 2.5 million square feet of industrial buildings under construction in our region, high demand for industrial property is expected to continue for the next few years. Industrial Market Drivers in Southwest Florida What’s driving our industrial real estate market surge? To start, changes in the supply chain and delivery trends during COVID restrictions have made warehouses, self-storage facilities, and multi-million square foot fulfillment and distribution centers highly-prized properties. Thanks to our strategic location between Tampa and Miami, Amazon, Uline, and FedEx have built or are building major facilities in Lee, Collier and Charlotte Counties. With both Southwest Florida International Airport and the Punta Gorda Airport expanding, we can expect to see continued growth in storage, logistics, and transportation. But supply chain reconfiguration is only part of the equation. Despite our region’s reputation as a haven for vacationers and retirees, the industrial sector in Southwest Florida is actually quite diverse and developing. Of course, construction has always been vital to our region, but our industrial sector reaches far beyond bricks and mortar. Thanks in part to our region’s aging demographics, medical manufacturing is a large part of the industrial sector. Companies like Lee County-headquartered NeoGenomics, which conducts diagnostic, prognostic and predictive cancer testing all over the world, are expanding their presence in Southwest Florida. Arthrex, a global medical device manufacturing company, is based in Collier County with a large logistics center in Lee County. Numerous smaller medical and biotechnology companies have followed their lead and dot the Southwest Florida landscape. Whether producing medical devices or consumer products, light manufacturing is on the rise in our region, absorbing millions of square feet of industrial space. Like the region’s medical manufacturers, these companies often produce products vital to the Southwest Florida economy. Manufacturers like MY Shower Door/D3 Glass and Storm Smart thrive in part because of Florida’s explosive residential growth. As long as residents continue to flock to Southwest Florida, we should anticipate more manufacturers in our area that produce construction supplies and similar products. Opportunities in the Industrial Market With the manufacturing sector growing across Southwest Florida, demand for industrial property should remain high for the next several quarters. Supply chain issues have slowed the pace of construction, and thus delayed the pipeline of new industrial properties emerging on the market. However, even after supply and demand reach a state closer to equilibrium, there are many benefits to owning industrial property. Industrial properties tend to garner longer-term tenants, creating a more stable income stream.  Industrial spaces typically need less maintenance and fewer amenities than other types of commercial spaces. With low tenant turnover and maintenance costs, these properties have the potential to produce higher yields for investors. The industrial real estate market in Southwest Florida—and across the nation—is experiencing its highest demand in history. Are you an industrial property owner looking for an opportunity in our current market?  Cushman & Wakefield | Commercial Property Southwest Florida (CPSWFL) has the knowledge, data, and resources to stay abreast of current commercial real estate trends in our region. The Commercial Property Experts at CPSWFL are ready to assist you with determining your best strategy for your property. Contact us by calling 239-489-3600 or reach us by contact-us.

By Gary Tasman Our region has become one of the most popular in the nation for starting new businesses and relocating existing ones, thanks to high inbound migration numbers during the pandemic and a pro-business tax environment in Florida. Melanie Schmees, Director of Business and Economic Research for the Greater Naples Chamber of Commerce, states that the Collier County Economic Development Office website has seen a ten-fold increase in inquiries from businesses wanting to relocate to Collier County since the start of the pandemic. Certainly, the Naples area is seeing growth. Thanks to a strategic position midway between Florida’s two largest metropolitan areas, Collier County is seeing growth in transportation, warehousing and logistics in particular. As an example, construction is underway on a 937,000 square foot distribution facility for Uline, which when completed will bring more than 200 jobs to Collier County. But other companies seeking to build in the area are finding challenges. Industrial Supply versus Demand in Collier County Demand for commercial property – particularly industrial property – is far outpacing supply in the Naples area. Our Southwest Florida Industrial Marketbeat report for Q4 2021 indicated that out of more than 10 million square feet of industrial inventory in Collier County, less than 50,000 square feet were vacant. And while a number of properties are under construction, according to Schmees, those facilities are already 97% leased. Many believe that Collier County lacks developable land, which is a fallacy. The county actually has several areas that are identified for potential growth and development. However, much of the County’s available land is neither site-ready nor entitled for commercial/industrial use, translating into high costs and long lead times for anyone hoping to develop on these parcels. Schmees was our guest on the What’s Developing in Southwest Florida podcast recently, and acknowledged the entitlement and readiness issue: “These companies, they know where they want to be and they need to make the decision fast,” she said. “That’s something that Economic Development and the County Commission is recognizing, the need to really form relationships with developers and with landowners to have sites ready for when these projects want to come, instead of carrying it out through a multi-year process.” Areas for Potential Industrial Growth The inland region, east of I-75 and north of Alligator Alley, has been the most rapidly growing area in Collier County for more than a decade. Infrastructure improvements to Immokalee Road, as well as the extension of Golden Gate Parkway, have made eastern Collier County easier to reach. Census data shows that while Collier County’s overall population increased by 17% over the last decade, the zip codes east of I-75 experienced an estimated 26% increase in population growth during the same time period. The town of Ave Maria is certainly the posterchild for Collier County growth. Little more than agricultural fields just a decade ago, Ave Maria is now a bustling community with a population of more than 15,000. It will be joined by a number of neighboring communities in the County’s rural land stewardship area. The town of Big Cypress and its Villages: Rivergrass, Longwater and Bellmar will all soon be under development by Collier Enterprises. With thousands more residents moving to eastern Collier County over the next several years, the need for jobs—particularly in the industrial sector, will grow. The Economic Development Council of Collier County estimates the County will need an additional 3,685 acres of new business park lands by 2030. One of the most logical locations for that industrial growth is in Immokalee, where land is inexpensive, and a ready workforce is already in place. Central Immokalee is just 15 minutes from Ave Maria, and a mere 25 minutes from the future Big Cypress villages. “I think Immokalee is a prime area for investment opportunity as it relates to incentives and programs,” said Schmees. “Immokalee is a [Collier County] opportunity zone and a [USDA] promise zone. It has an FTZ for that foreign trade. Figuring out how to stack those and take advantage of those opportunities out there as a developer or investor, it’s a prime area to do that.” Part of the challenge is that while many recognize Immokalee’s potential, no business or developer wants to be the first to plant their flag. According to Schmees, investors and developers want a model or case study to follow—someone who has already made successful strides in the area. For decades, tourism and hospitality have been the major drivers of Southwest Florida’s economy—especially in the area’s coastal regions like Naples. However, our regional economy is becoming more diverse, a topic we’ve discussed here before. Diversification of our economy creates the opportunity to increase wage capacity in Southwest Florida while maintaining our excellent quality of life. For Collier County to reach its full potential, it needs to continue working with investors and developers to take a chance on the eastern part of the county, and particularly Immokalee. If you are a commercial property investor or developer looking to capitalize on eastern Collier County’s ongoing growth, contact the Commercial Property Experts at Cushman & Wakefield | Commercial Property Southwest Florida by calling 239-489-3600 or by contact-us. For more information about development in Collier County, listen to episode 3 of the What’s Developing in Southwest Florida podcast.

By Gary Tasman In early March, the Florida House passed a bill that is designed to help local governments and developers to create more affordable housing opportunities in the state. SB 962: Residential Development Projects for Affordable Housing has now passed both the Senate and the House with unanimous bipartisan support and appears to be on track for the Governor’s signature. The bill would allow local governments to approve residential and mixed-use developments on any parcel of land zoned for commercial or industrial use, as long as at least 10% of the project’s units are reserved for affordable housing. The bill is seen as a potential booster shot to cure the state’s deficiency of workforce housing. While this is an admirable step for the legislature, it should not be our only action to resolve the affordable housing crisis in our area. Affordable Housing in Florida For those seeking affordable housing options, Florida is one of the most challenging states in the nation. A 2021 report by the National Low Income Housing Coalition notes that while no state has an adequate supply of affordable housing for its population, the Sunshine State is in the nation’s bottom five. The state has a deficit of more than half a million affordable and available rental units for households earning 50% of the area’s median income. The affordable housing crisis is exacerbated by skyrocketing real estate prices over the last decade. Increases in the cost of housing have far outpaced wage growth in Florida. A 2021 study by QuoteWizard notes that while wages statewide had grown nearly 21% over ten years, median home prices have jumped 99.3% during that same period. Potential Solutions to the Affordable Housing Crisis There are three potential answers to the affordable housing problem, however only one is a truly realistic scenario. The possible solutions are to: Increase wages Decrease the cost of housing Increase housing supply Let’s take a look at each of these possible solutions. We’re certainly seeing progress statewide in income growth, although not at the level we would need to catch up to our current home prices and rental rates. We also expect to see some sort of correction in our housing market in the future, but it’s doubtful that home prices will fall significantly. Instead, we expect to see home and rental costs simply stabilize. While the two factors above could help alleviate a small amount of pressure, the biggest impact we can have on resolving our affordable housing woes would be to increase the amount of housing stock in our communities, and to do it more quickly than demand is growing. Increasing Housing Supply Through Density With the exception of our region’s coastal areas, Southwest Florida is a haven for single-family homes and gated communities. While that makes for a pleasant suburban feel, it also increases urban sprawl, making it more expensive to live here. Sprawl means that municipalities must pay more to deliver services like police, fire, ambulances, public transportation and sanitation services, which in turn raises our local taxes. Residents in sprawling areas endure longer average commutes and use more gasoline, further raising the cost of living. The most logical solution to ease the burden of urban sprawl is to increase density—or the number of housing units allowed per acre of land. By concentrating density in areas with adequate infrastructure, we can reduce the cost of providing municipal services, thus keeping our costs of living lower. Higher density also provides the opportunity for more housing diversity, like apartment units ranging from one-room studios to four-bedroom penthouses, as well as more condominiums, duplexes, and other multifamily options. Concentrated Development in Southwest Florida Here in Southwest Florida, we already see examples of municipalities that are strategically concentrating development. Fort Myers’ Midtown neighborhood represents one example. Infrastructure improvements will accompany the development of this area, which will include high-density housing all within walking distance of the desirable River District. Charlotte County employs a strategy called Transfer Development Units (TDU), which identifies appropriate locations for higher-density development, as well as areas where density should be reduced. The goal of the TDU program is to encourage the removal of outdated platted subdivisions and lots and support more sustainable higher-density mixed-use development. And in Collier County, the East Naples development plan hopes to spark more walkable neighborhoods and mixed-use communities with workforce housing opportunities. Just this week, three new apartment complexes broke ground, promising to bring more workforce housing and affordable units for seniors to East Naples. While Florida’s SB 962 should be celebrated as a victory for affordable housing advocates, local governments have tried to incentivize developers to hold back units for affordable housing for decades—with minimal success. Instead of encouraging builders to create more affordable units, they often discourage developers from pursuing projects at all. However, government incentives, paired with smart growth and higher density developments, may offer the key to solving our local affordable housing troubles. Are you a developer seeking opportunities in Southwest Florida? The Commercial Property Experts at Cushman & Wakefield | Commercial Property Southwest Florida have the knowledge and experience to help guide you. Call our team at 239-489-3600 or contact-us.